BUDGET WILL BOOST SCHOOLS; DAVIS SPENDING PLAN INCLUDES TAX CUTS.

Byline: Steven A. Capps The Sacramento Bee

Crediting California's ``extraordinary, robust economy'' for a $4.3 billion budget surplus, Gov. Gray Davis on Friday sent a revised 1999-2000 spending plan to the Legislature, asking that most of the extra money go to schools and public works.

The $80.8 billion budget proposal would boost annual school spending by nearly $300 per student, earmark $1 billion for various public works projects and set aside enough money to provide state employees about a 6 percent pay raise.

The proposal provides about $300 million in tax cuts. Most of that, however, was approved by Davis' predecessor and would not take effect until 2001 - and then only if the state's economy continues its upswing.

While Republican legislators said they were disappointed at the lack of a much larger tax cut, Davis said he had no choice.

``I believe the tradeoff is between badly needed investments in safer schools, better parks, better local roads and more tax relief,'' Davis told reporters. ``I have provided tax relief that I think is prudent and will spur economic growth.''

Senate President Pro Tem John Burton was perturbed he had not been briefed by Davis about the budget proposal before it was unveiled for reporters Friday afternoon.

``These are the governor's thoughts and we'll have our thoughts. . . . No budget will be rammed down our throats,'' the San Francisco Democrat said. Asked if he was angry over the lack of consultation, Burton said he was ``surprised. And everybody knows how I like surprises.''

The Democratic governor, who just five months ago said he believed the state was facing a revenue shortfall, said the windfall was due almost exclusively to a sharp upturn in personal income tax payments.

The state will end the fiscal year June 30 with about $1.6 billion more than expected, and can expect to collect about $2.7 billion more than anticipated in the 1999-2000 fiscal year, he said.

Davis, however, said he could not count on the upturn continuing, especially since much of it may have been due to taxes paid on stock market profits, and so would direct most of the $4.3 billion windfall toward one-time purposes.

Those include the purchase of school textbooks, school safety programs and various public works projects, including local roads and water projects, $157 million of maintenance work at state parks and construction of a new $335 state prison in Delano, Kern County.

He also said he would boost the state's rainy day reserve fund to $985 million, nearly twice what he proposed in January.

``We tried to spend money in a way that was prudent, that didn't saddle the state with unnecessary long-term spending, that took advantage of the extraordinary, robust economy in which we're living to strengthen schools, to make them safer places, to lower tuition to go to college, to help finance transportation projects and other capital needs that could be paid for with our current abundance,'' Davis said during a Capitol news conference Friday.

``It is great news that public education will be a major benefactor of the $4.3 billion increase in state revenue,'' said state schools head Delaine Eastin, whose own budget would receive $8 million that had been removed by former Republican Gov. Pete Wilson.

Davis said he was setting aside $300 million for state employee pay raises, and to pay the costs of unspecified litigation. If the employees were to get all $300 million, it would pay for a 6 percent raise.

Union leaders said they were a little confused.

``We know what the employee compensation means,'' said Perry Kenny, president of the California State Employees' Association, ``but we don't know what he means by using some of the money for lawsuits. The state has so many lawsuits, this ($300 million) wouldn't even pay interest on some of them.

``If we got all of the $300 million that would be a 6 percent raise, which is a good starting point for us to move forward on. We also think it's time supervisors got a raise, too, since the supervisors have lagged behind,'' he said. ``I think we'll look beyond the $300 million to the ($985 million) reserve out there to see if that is available as well.''

Legislative Republicans, some of whom have called for tax cuts of more than $1 billion, were not impressed.

``Assembly Republicans are not interested in supporting a budget that does not include tax relief,'' said Assembly GOP leader Scott Baugh, R-Huntington Beach. ``Assembly Republicans cannot and will not accept that there is no place for taxpayers at this bountiful table.''

Johnson said the budget would only win Republican support in the Senate after ``real work.''

``In these boom times, the taxpayers ought to get some additional consideration,'' he said. ``I think it is only fair that they receive some benefit from additional tax reductions.''

BUDGET PROPOSALS

Some proposed spending increases for schools and local governments in Gov. Gray Davis' revised 1999-2000 state budget:

Local schools

Unanticipated enrollment increases: $374 million.

Textbooks: $144 million.

Maintenance: $143.7 million.

School safety programs: $100 million.

Parental involvement programs: $40 million.

Teacher incentives and performance awards: $40 million.

After-school programs: $35 million.

Preschool programs: $23 million.

Other local governments

Infrastructure bank: $425 million.

Local commuter trains and ferries: $75 million.

Adult and juvenile detention: $75 million.

Law enforcement grants: $61 million.

Trial courts: $46 million.

Flood control projects: $44 million.

Parole programs: $36 million.

Rural crime prevention: $3.5 million.

Victims' services and restitution: $1.3 million.

Methamphetamine task force: $300,000.

CAPTION(S):

Photo, Box

PHOTO Gray Davis

Says economy made surplus

BOX: BUDGET PROPOSALS (see text)